Short term trading in the Nigerian stock exchange (market) is what most people are advised to go for. You can make quick money from speculation quicker than you’d ever imagine. It is possible to get some stock unit, let’s say for N200,000 and quickly make gain by selling it within the next few weeks or months.
However, it is possible to buy some unit for N200,000 and watch your money deplete into half within the next few weeks. So, this is a lose or gain approach. But if you are well informed about the ins and outs of investing in the stock market and the Nigerian stock exchange, it is possible to avoid the risks and make quick cash.
Some people prefers to trade on high cap stocks, while others prefers trading on penny stocks.Whichever one you chose or you decides to trade on both, the truth is that you can make money if you are wise and informed about trading in the Nigerian stock market. Now, let’s get over to the things you will need.
What You Need To Start Investing In The Nigerian Stock Exchange
There are three major things you will need to start trading. There are as follows –
1. Get a Stock Broker/Brokerage Company
The Brokerage firm or your stock brokers acts as the intermediaries between you and the stock market. They handles the intricate parts of your transactions and get commissions for their efforts.
The Duty of Your Stock Broker: Your Brokers will help you open a CSCS (Central Securities Clearing System) account which in turn would make it possible for you to buy stocks, you may not be able to buy stocks on your own; you have to go through your stock brokering firm.
If you are buying from the primary market, that is the one that the company advertises directly, in filling the forms, you must state the name of your stock broking firm and your CSCS account number. So, you must have a stock broker even if you are buying from the primary market.
For the secondary market, you must inform your stock broker, who will then go to the stock exchange and buy your desired stock on your behalf on a regular basis.
2. Open Investor’s Account
The moment you decides to trade in the Nigerian Stock Exchange, you are becoming an investor. Therefore, you will need investor’s account. An investor’s account is an account that is unique and tied to your name as an investor. It is normally opened for you along with a CSCS account with which your stocks would be moved in. It is opened for you by the stock brokerage firm or broker whom you have assigned to act on your behalf. All transactions done on your behalf would then be recorded against your name in your investor’s account.
Each time your broker wants to buy stock on your behalf, he buys it into your investor’s account. The account is for both equity and bonds.
3. Secure Trading Capital
You and I know what that is. There is no technicality involved in explaining that. Depending on the volume you want to trade or what I will call the amount of risks you want to take, you will need enough trading cash that is proportional to your trading options.
More than anything else, knowledge is your power in this business. You must be in the know, constantly updating your knowledge of the market and be in-tune with the latest trends. You must be good at spotting opportunities and possess the ability to predict trends.
“Buy the rumours and sell the news”. That’s a very popular saying among investors. It means – Do not trade on sentiment.
Making Money With The Nigerian Stock Exchange
The game is simple! Spot a good commodity in the market, predict accurately it’s movement, buy, and sell at the right time.
Let’s take for example you bought Ashaka Cement shares worth N200,000 at the price of 1.00 kobo per share, if by next month the price appreciates to 4 kobo per share, you’ve made 4 times your money after selling, which will amount to N200,000 x 4 = N800,000
On that trade, you will pay a total commission of about N,8000 and pocket your profit of N592,000 from that single trade.
Next article will shed more light on buying and selling. Drop me a comment or questions below.